[Temperature Check] Lock treasury UNI in Maker vault and use borrowed DAI to generate yield

The idea has come up a few times throughout the forum, the exact mechanisms like amount, where to generate yield and what to do with the proceeds can be discussed further if people seem to agree that this is a reasonable or interesting use of funds.

Lock treasury UNI in Maker vault and use borrowed DAI to generate yield?
  • Yes
  • No

0 voters

8 Likes

Hi, Maker governance participant here. Currently the rate to borrow Dai against UNI is 3%. The current lending rate for Dai on Compound is 6.83%, so there is a simple arbitrage there, however, Compound rates fluctuate rapidly so that is one risk.

Alternatively, Uniswap governance could borrow Dai using some part of its treasury and use some part of the remainder to provide liquidity on the UNI/DAI pair without having to sell UNI for stablecoins. The Dai could be swapped for other stablecoins to provide liquidity on other pairs.

The Maker community would be excited to have Uniswap as a customer. Currently Maker supports a similar treasury vault from the Yearn protocol, and it’s exciting to see more of these protocol-to-protocol partnerships develop.

5 Likes

Is maker have enough diversified collateral to handle that much of one token and potential undermine the dai?

1 Like

Maker already has UNI as a collateral type, it is currently at 80% utilization of the debt ceiling.
If there is sufficient interest to pursue this proposal, we would work with Maker governance to estimate reasonable parameters.

2 Likes

I envision making use of the simple arb you mention as a good first step, but would be curious to see what others think.
Perhaps providing stablecoin liquidity on Uniswap V3 would be a nice approach.

2 Likes

There are fixed rate protocols that let you lock in APR. For example, Notional offers 5-8% to DAI lenders at the moment, depending on the term.

Hey, I just wanted to pick up this conversation again. Like @zenithlight mentioned, Yearn is currently in discussions to onboard a new vault with high collateral ratio, higher debt ceiling and lower fees. This ensures that Maker can safely take on more volatile collateral while producing more DAI and also giving the borrower better rates. If I wanted to push this idea forward through UNI governance more, what would be the best steps? I think this would be an especially good use for the Uniswap Grants program so you could pay out recipients in a stablecoin instead of UNI while still catching the UNI upside as the protocol continues to gain value. Not to mention its kind of hard to weaponize billions of dollars in illiquid tokens! I could put you together with our rates group or growth team to hash out a proposal. Let me know!

2 Likes

If this governance change wants even a remote chance of passing, the DAI would need to be going into Compound or Aave.